CBN opposes SEC’s ‘absolute powers’ to regulate public companies

…Says proposed law in conflict with CBN powers

The Central Bank of Nigeria (CBN) has raised concerns over several provisions in a proposed Investment and Securities Bill intended to regulate the capital market, particularly clauses that grant the Securities and Exchange Commission (SEC) extensive powers over public companies.

The apex bank raised the concern on Thursday during a public hearing on the proposed bill, which seeks to repeal the Investment and Securities Act 2007 and introduce the Investment and Securities Bill, 2024, organised by the Senate committee on capital market.

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Tukur Galadima, a representative from the CBN, stated that a major issue in the proposed legislation was the term “public companies” in the SEC’s expanded regulatory remit.

He said the proposed bill was such that the SEC would be given absolute powers over public companies. He contended that public companies include banks and other financial institutions which are within the purview of the central bank.

Galadima noted that this provision was not part of the consensus at a stakeholders’ meeting, including the CBN, held last year to discuss the proposed legislation. “I think if we take last year’s harmonised position, that problem will be easily solved,” he said.

He further highlighted additional terms in the bill that could lead to overlaps and even conflicts with the functions and powers of the CBN. For instance, he argued that the clause on unclaimed funds should be clarified.

“I’m sure what is meant are unclaimed dividends, which is within the purview of the SEC, so this can be easily corrected,” he noted.

Galadima also expressed concern over the definition of ‘financial market infrastructure’ in the bill, stating that the term, as currently defined, could include payment and settlement systems, which are within the CBN’s regulatory scope under Section 47 of its Act and the Banks and Other Financial Institutions Act (BOFIA).

“There are also issues related to takeovers, mergers, corporate restructuring. Under BOFIA, the central bank has been given powers on those issues as far as banks and other financial institutions are concerned. But we have no problem with SEC being involved in these things, let the powers be couched that there will be no overlap of functions or conflict” he added.

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Galadima also pointed to Section 193 of the bill, which concerns investments in multi-currency collective investment schemes. “We all know that currency issues fall exclusively under the CBN’s purview. Specifically, the CBN has the authority to set conditions for foreign currency usage in Nigeria. Granting such powers to the SEC would be contrary to that power of the central bank”, he explained.

The CBN representative further criticised provisions in the bill allowing cash purchases of securities, warning that this contravenes the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act of 1995.

“That is illegal as it is now. You cannot also use cash to buy real estate. There are several transactions that you cannot do with cash under that Act. So, for you now to say that somebody can use cash to buy securities, that is completely illegal”, he argued.

He warned that this would encourage money laundering. Galadima, however, assured that the CBN was in total support of the amendment to the Investment and Securities Act, and urged the Senate to look into its observations for effective regulation alongside SEC.

“We are, as always, willing to work with SEC, to work with the committee, to work with all the stakeholders to ensure that the bill is speedily passed”, he added.

Emomotimi Agama, director-general of the SEC, in his submission, said the functions and powers of the SEC were separated and stratified in the new bill.

Agama said the new functions and powers provided were to strengthen the SEC’s enforcement capacity to enable it retain its signature status.

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Some of the new functions provided in the new bill include registering and regulating derivatives markets, registering and regulating collateral management companies and warehouses that issue warehouse receipts, reviewing the fairness of mergers and acquisitions of public companies, helping prevent and sanction unauthorised and illegal deals in securities and investment schemes, alongside the provisions that speak to the new wave of fintech institutions within the fintech space.

The proposed legislation also considers extending the registration and regulation of exchanges and financial market infrastructure to include every financial market infrastructure, every trading venue that houses the facilitation of the trading of securities.